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How a Succession Plan Can Protect (and Improve) the Value of Your Business

We’ve all heard the story many times before.

Business owner puts in thousands of hours to grow and develop their business. 

Business owner borrows money to grow and expand. 

Over time, business thrives. 

After years of sacrifice and hard work – business is sitting in a comfortable place. 

Business owners’ mind turns to selling, to collect their reward – after years of sacrifice. 

However – achieving the most amount of money possible for your business requires the same diligence it took to grow it. 

So, how can you ensure you receive a return for your efforts?

Effective succession planning is the key to protecting, growing and realising the maximum value for your business. 

 

What is the End Game for your business?

Do you have a business exit strategy?

All successful strategies have a final goal or objective. 

A succession plan ensures a process that allows you to smoothly transition the ownership and/or management of your business. 

It’s your end game. 

 

Factors Affecting finding a Suitable Buyer

Research shows that the price of your business is impacted by the availability of a suitable buyer for example;

Complacency  – When business owners fail to address succession issues early enough

Lack of Awareness – Business owners are often unaware of all their succession options and fail to identify opportunities

Familial Differences – Research has shown Generation Y lack aspirations of business ownership

Market Changes – Reduced borrowing capacity due to increased house prices restricting the funding options for potential buyers

The potential for problems is high and unfortunately, more often than not, something throws a spanner in the works.

Business owners without a succession plan are placing themselves in a risky position of not being able to identify a suitable buyer at the right time. 

 

Why You Need a Succession Plan Sooner Rather Than Later

Do you remember what you paid for petrol when you started in business? Maybe 39 cents a litre?

Times change, markets change and so does the business environment.

Cheaper technology and startup costs and the increased acceptance of people working from home, means that it can be very attractive for people to set up their own business, rather than buy yours.

Business success demands focus by you on the operation, but ultimately, issues of succession and retirement will creep up.

It is therefore critical to have your business running effectively enough so that it is more attractive for someone to buy your business rather than start from scratch.

Getting a buyer, let alone the right price you need could be elusive.

You’re a business owner and you understand the driving forces behind competition, supply and demand. So when:

  • More businesses are for sale – lower prices result or buyers can be choosey
  • With fewer qualified buyers – it becomes a Buyer’s market
  • In a Buyer’s market – they can be selective, value driven and put downward pressure on prices

 

Thus, it is critical for you to start planning your succession now.

 

But How Do I Start My Succession Plan?

If you make any moves at all to start your succession plan today, start with this.

Work out when you may want to retire and what the sale price of your business needs to be to fund your next chapter.

Determine the current value of your business and therefore what the gap is.

Try to identify potential buyers, internally and externally

We can guide you through this process, and help you develop and implement your succession plan all the way through to successful sale.

Get in touch now if you want help creating a detailed succession plan today. 

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